Defence expenditure and economic growth in the European Union - A causality analysis

This paper examines the relationship between military expenditure and growth among the EU15 members using co-integration and causality tests for the period 1961-2000. Although the results reported herein do not reveal a uniformity among the 15 countries, the apparent prevalence of the direction of causality from growth to military expenditure as well as the absence of the reverse causal ordering may be an indication that an important number of governments in the European Union (EU) make defence spending policy decisions based on the state of their economy with the concomitant implications for the objective of a Common European Security and Defence Policy (CESDP). (C) 2004 Society for Policy Modeling. Published by Elsevier Inc. All rights reserved.